21st Century Risks

By Christiana Cefalu

Where do a family’s risks lurk at the dawn of the 21st century? Last month billionaire CEO Michael Dell got a wake-up call about where precisely the security risks are in our globe-trotting modern age, a scare triggered by his kids’ social media activity. According to published reports, his daughter Alexa posted to photo-sharing social network Instagram, a picture of her brother Zachary aboard the family jet en route to Fiji. The photo made it to Rich Kids of Instagram, a tongue-in-cheek site that logs such photos. Alexa also tweeted her high school graduation dinner invitation.

What Michael Dell experienced firsthand, says Jonathan Crystal, executive vice president of the Private Client Services Group at his family-owned insurance firm, Frank Crystal & Company, is an example of the 21st century risks that are inherent in “the globalization of wealth.” When people are abroad, out of their immediate social milieu, they sometimes lower their guard, thinking they can get away with behavior they would never do at home – just ask Prince Harry about his latest Las Vegas trip.

What Alexa and Zachary Dell did was the innocent high-jinks of normal kids, of course, but the public disclosure of their exact whereabouts was riddled with risk. The Dell family was not only exposed to ridicule and a broad “family wealth and reputation” smackdown, but also, in the extreme worst case scenario, exposed to “kidnapping and blackmail” risks.

“Children are a way to get to the family,” Crystal says.

But something more profound is actually going on below the surface of the Dell flap. American families are increasingly traveling or spending parts of the year in Asia or Europe, while families from abroad come to the U.S., acquiring real estate and other assets. It’s also becoming more common to work abroad, to send kids abroad to study (see current Penta story, “Travels With Meg”), and to have family assets sprinkled around the globe.

“Globalization of family wealth becomes a risk issue in and of itself,” says Crystal. The danger: most families don’t seem to be aware of those risks, until, as in the Dell case, the risks are brought home in a visceral way.

Perhaps not surprisingly, concerns raised by his firm’s high profile clients, like pro athletes and presidential candidates, are most often these days related to privacy. “There’s no such thing as quiet wealth in the age of Google,” he says.

Folks have to live, of course. You can’t spend your life curled up in a paranoid ball at the foot of the bed, or forbid your kids from living as full and normal lives as they possibly can. But remember this: the greatest risks are those you are unconscious of; just being aware of a risk lowers its danger factor.

Consider, for example, a family hosting a fundraiser at their home. Before the party, the family’s home will swell with caterers, musicians, lighting contractors, parking valet, and other third parties. Crystal says in such cases there’s “exposure from a liability standpoint, but also in inviting all of these people in your home who may not have the best of intentions.”

Most obviously, damage to possessions comes to mind, though “not withstanding sentimental value, they can be replaced.” Far more dangerous, “a multi-million dollar lawsuit can threaten the wealth of a family.” It could come, say, from alcohol-induced swimming pool or driving incidents. So stay alert. Deep pockets attract lawyers.

About Penta

Written with Barron’s wit and often contrarian perspective, Penta provides the affluent with advice on how to navigate the world of wealth management, how to make savvy acquisitions ranging from vintage watches to second homes, and how to smartly manage family dynamics.

Richard C. Morais, Penta’s editor, was Forbes magazine’s longest serving foreign correspondent, has won multiple Business Journalist Of The Year Awards, and is the author of two novels: The Hundred-Foot Journey and Buddhaland, Brooklyn. Sonia Talati is Penta’s reporter about town, both online and for the magazine. She previously worked for the Wall Street Journal and various television station affiliates around the country. Sonia has a B.A. in economics from the University of California, Los Angeles, and an M.A. from Columbia University Graduate School of Journalism.